- The Australian dollar is rebounding as market sentiment improves, following news of the US reducing its tariff negotiation goals.
- China’s Kaisin production PMI increased from 48.3 in May to 50.4 in June.
- The US dollar continues to face setbacks due to uncertainty from the Fed and growing fiscal worries.
The Australian Dollar (AUD) is seeing some recovery against the US Dollar (USD) today, spurred by reports that the US may scale back its targets for a comprehensive trade deal. As per the Times of Finance, President Trump’s trade team is looking for a more step-by-step approach with certain key countries, pushing for a deadline by July 9 to avoid reintroducing stricter tariffs.
Yet, the AUD/USD pair encountered some difficulties as Australia’s S&P Global Manufacturing Purchasing Managers’ Index (PMI) slipped from 51.0 in May to 50.6 in June. This drop represents the lowest reading since February, largely attributed to higher client inventories and lackluster market conditions.
On the flip side, newer data revealed that China’s Kaisin manufacturing PMI improved to 50.4 in June, up from 48.3 in May, surpassing the market expectation of 49.0. This improvement is noteworthy since economic changes in China could affect the AUD, given the close trading ties between the two nations.
The AUD/USD pair might be able to regain momentum as the US dollar grapples with continued uncertainties. The Federal Reserve’s policy outlook is generating some concern, especially with ongoing discussions about substantial tax and spending proposals in the Senate that could increase national debt by $3.3 trillion.
Australian dollars strengthen as US dollar weakens amid shifting risk appetite
- The US Dollar Index (DXY), which gauges the dollar’s value against six major currencies, has been in a winning streak, hovering around 96.70. Traders are looking forward to the release of the US’s June ISM Manufacturing PMI data scheduled later today.
- In May, the US Personal Consumption Expenditure (PCE) price index rose 2.3% year-on-year, slightly up from a 2.2% increase in April (revised from 2.1%). This aligns with market predictions. Meanwhile, the Core PCE Price Index, excluding volatile food and energy prices, went up by 2.7%, from a previous 2.6% (revised from 2.5%).
- Federal Reserve Bank of Minneapolis President Neil Kashkari reiterated on Friday that he believes the Fed could lower its policy rate twice this year, starting in September.
- President Trump has reportedly undermined Fed Chairman Jerome Powell’s authority by suggesting names of potential successors for next year without issuing specific names. Chicago Federal President Austan Goolsbee noted that political influences will not play a role in their decision-making.
- Fed Chairman Jerome Powell mentioned that while Trump’s tariff strategies could lead to short-term price increases, they might also provoke more sustained inflation, necessitating careful consideration before pursuing additional interest rate cuts.
- A US intelligence report suggests that recent US strikes on Iranian nuclear sites have only temporarily delayed Tehran’s program. Iranian Foreign Minister Abbas Araguchi has stated that Tehran does not plan to resume nuclear discussions with the US.
- China’s NBS Manufacturing PMI improved slightly from 49.5 in May to 49.7 in June, aligning with market expectations. The NBS non-manufacturing PMI also increased to 50.5 in June, up from a forecast of 50.3.
- The TD-MI inflation gauge rose by 0.1% month-on-month in June, bouncing back from a decline of 0.4% previously, staying within the target range of 2-3%.
- Australia’s private sector credit grew by 0.5% in May, coming in below expectations after a 0.7% spike the prior month. This slowdown is largely due to decreased business loans, which fell from 1% in April to 0.8%.
After pulling back from eight-month highs, Australian dollars trade around 0.6560
The AUD/USD pair is trading near 0.6560 today. Analysis indicates a sustained bullish trend as the pair continues within a rising channel pattern. The 14-day relative strength index (RSI) is above the 50-mark, and the pair has also surpassed the nine-day exponential moving average (EMA), suggesting strong short-term momentum.
However, it’s worth noting that the pair recently hit an eight-month peak of 0.6583 on July 1, before the upper boundary of the ascending channel came into play near 0.6650.
A nine-day EMA of 0.6529 acts as a key support level. Should the price dip below this level, it could diminish short-term bullish momentum and put pressure on the AUD/USD pair, possibly testing the lower channel limit around 0.6490, which aligns with the 50-day EMA at 0.6456.
AUD/USD: Daily Charts
Australian dollar prices today
The table below outlines today’s performance of the Australian Dollar (AUD) against various major currencies, with the AUD showing strength against the Canadian dollar.
| USD | EUR | GBP | JPY | CAD | aud | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | -0.10% | -0.26% | -0.01% | 0.00% | -0.09% | -0.12% | |
| EUR | -0.04% | -0.13% | -0.39% | -0.05% | 0.05% | -0.15% | -0.15% | |
| GBP | 0.10% | 0.13% | -0.16% | 0.11% | 0.19% | -0.01% | -0.02% | |
| JPY | 0.26% | 0.39% | 0.16% | 0.30% | 0.27% | 0.15% | 0.15% | |
| CAD | 0.00% | 0.05% | -0.11% | -0.30% | -0.00% | -0.12% | -0.13% | |
| aud | -0.01% | -0.05% | -0.19% | -0.27% | 0.00% | -0.20% | -0.21% | |
| NZD | 0.09% | 0.15% | 0.01% | -0.15% | 0.12% | 0.20% | -0.01% | |
| CHF | 0.12% | 0.15% | 0.02% | -0.15% | 0.13% | 0.21% | 0.01% |
The table illustrates how the Australian Dollar’s value fluctuates against leading world currencies, revealing that it is currently the strongest against the Canadian dollar.
Australian Dollar FAQ
Interest rates set by the Reserve Bank of Australia (RBA) are crucial for the Australian Dollar (AUD). Being resource-rich, the price of iron ore also plays a significant role as it is Australia’s largest export. The overall health of China—Australia’s biggest trading partner—affects inflation, growth rate, and trade balance, contributing to market sentiment.
The RBA influences the AUD through interest rates, which affect broader economic lending rates. Its main aim is to maintain stable inflation at 2-3% by adjusting these rates. Higher interest rates generally support the AUD, while lower rates do the opposite. The RBA can also utilize quantitative easing or tightening to impact credit conditions.
As China’s largest trading partner, the state of China’s economy significantly impacts the AUD. If China’s economy is robust, it increases demand for Australian goods and services, raising the AUD’s value. Conversely, if China’s growth is sluggish, the opposite occurs, leading to fluctuations in AUD based on China’s economic reports.
Iron ore is a major export for Australia, primarily going to China. With annual figures reaching $118 billion in 2021, iron ore prices can drive AUD’s value. Typically, rising iron ore prices boost the AUD, while declining prices result in the contrary. Better iron ore prices also tend to enhance Australia’s trade balance, further benefiting the AUD.
Trade balances—the difference between a country’s exports and imports—can also influence the AUD’s value. A favorable trade balance from popular exports can enhance currency strength due to increased demand from foreign buyers, while a negative balance would have the opposite effect.
